Home Articles The Future of the IT channel (and the 2025 Car Market)

The Future of the IT channel (and the 2025 Car Market)

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By Mark Adams, CCO of Cloudmore

It’s 2025 and you are the franchise owner of a city-based car dealership. The manufacturer of the cars you sell has just arrived…

He says to you: “The future is renting electric cars, we are not going to sell cars anymore, instead we are going to rent them – and we want you to help us!”

You reply: “Errr, that’s great… I think… how much margin do we make?”

The business model works like this: You find the customer, you sell to the customer, and look after the customer and for that we let you have 12% margin for the first year and then 4% per year after that.

Your first thought is that all my sharp suited sales people are going to have to go…. OK, this could be OK because right now we earn a lot of money from the on-going servicing of the vehicles.

“So how much do we get for looking after the the cars then?”

The manufacture replies: “ah, well, you see we do that. We look after the cars – they are pretty much maintenance-free and we repair them remotely, so you won’t really need to look after them… But,” he added “you can earn some great money washing them!”

The penny is starting to drop now, you probably won’t even bill the customer in the future, all the effort invested in your maintenance workshop will be wasted – and you are certainly going to need to downsize your upmarket dealership premises.

Is this a likely scenario? Well, renting smaller electric vehicles around cities has already arrived; it’s just not main stream yet. Another very likely scenario is that we will see new innovative companies with no legacy of expensive premises and people to hold them back changing charging and service delivery models.

It is fun to hypothesise about such things, but for the supply of IT the future has arrived in 2013. Moves by the big players into direct contact with the customer, solutions that are “self-healing” at the backend – and a set of competencies in the Channel that are starting to look out of step with the customer requirements of the future.

A vision of the future channel (emerging now)

So what might a Channel player of the future look like? We already know that the Customer conversations are starting to be less technical, more about the business value derived from the solution; we are starting to see new supply chain models where the Channel Partner acts more as a solution advisor than reseller – and gets margin more like a distributor; and we know that the average Channel Partner’s cost-base needs some serious attention.

…the Channel Partner acts more as a solution advisor than reseller – and gets margin more like a distributor…

I predict there will be consolidation – and although these new companies will have more customers – the average revenue per customer will be lower. They will mainly purchase from a limited number of Cloud aggregators/brokers to keep down their own costs, and only the biggest will own their own clouds. The sales teams will be more like business consultants advising how the end-customer can derive a competitive advantage from the use of a particular solution, but they will also be experts in distributed security models and processes. Training will be provided in on-demand models with the most innovative companies producing lots of their own content to help and advise their customers and users to get the best from their systems. I believe that contract terms will still be measured in years but payments models we be pay-per-use, probably on a quarterly basis for most.

The most difficult change for many Channel businesses will be the ability to continually attract new customers. I would suggest that this is not a core competence (as a general rule) across the channel, and I know that traditional methods of feet on the street will not be financially viable… so the successful companies will need to have powerful, low cost lead generation and sales engines. This is not going to easy for many.

SaaS, PaaS and IaaS vendors will continue for struggle over the next few years in terms of their commercials, SLAs and Go-To-Market Models. A significant part of what Cloudmore do with our own vendors is help them through this process, no matter what size they are.

But where this is disruption there is opportunity.

I am seeing some fantastic new and innovative companies trying to make the most of the new style supply chain. Indeed, our recent integration of the IBM SmartCloud for Social Business solution in to the Cloudmore portfolio means you can now deploy this service to your customer in minutes, it’s about 4 minutes actually! This means this solution is now a viable option for SMBs, through the Channel, and as a ‘trojan horse’ into larger mid-market companies by deploying onto one department and letting the viral thing happen.

This can be non-disruptive, new revenue for a Channel Partner, and starts that deeper business value conversation with the Customer. So a Customer who is pushing for a Cloud solution can be not just given a cheaper alternative – for instance: substituting Exchange Email for another Exchange Email, what value are you adding by doing that? Adding value with innovation and different approaches creates loyalty.

With over 1000 Partners across 6+ countries serving over 6000 end-customer organisations, Cloudmore are constantly innovating towards next generation Cloud Aggregation business model to enable businesses to move to the Cloud quickly, seamlessly and securely.